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Shimano slashes component pricing

Published February 10, 2016

IRVINE, Calif. (BRAIN) — Shimano American has slashed wholesale and retail pricing across its range of higher-end components and groups, from SLX all the way up to Di2 both road and mountain. The changes are component-specific and vary depending on the part.

"We see price changes from an increase of 1 percent to a decrease of 40 percent," said Wayne D. Gray, vice president of KHS, which distributes Shimano. "No specific percentage across the board. But there's reduction in our recommended wholesale pricing and retail of many items. It's on the high-range stuff — anything above SLX is reduced on price," he added.

"We launched new prices yesterday, and instantly my parts catalog is of no value," Gray said. "Fortunately we have B2B sites now where dealers can see reduced pricing."

The difference between old wholesale and new retail pricing is such that retailer margins have slimmed substantially on inventory currently on shelves. Inventory was immediately devalued.

Shimano American declined to comment on any pricing changes. "Due to all the litigation potential around pricing, we don't discuss strategy or why we make those moves," said a company spokesperson. "We don't discuss pricing at all."

With new retail pricing, a Deore XT front brake, for example, which had a suggested retail price of $159.99, now has a suggested retail of $118.99 — a 26 percent change. With the new price lists, margins were trimmed substantially on inventory bought at old wholesale pricing, and margins also slimmed on new wholesale prices.

Dealers said they heard of the pricing changes from their reps, who noted that they were made to help brick-and-mortar dealers compete with online discounters.

"Shimano didn't contact us," said Brian Blair, buyer for The Path Bike Shop with stores in Tustin and Trabuco Canyon, California. "We didn't know about the change until yesterday when we got an email from an outside rep."

Shimano's updated pricing can also reflect the strength of the U.S. dollar against the depreciating yen, and other currencies. It also could reflect what has been an almost 20 percent drop in the cost of a metric ton of aluminum over the last year, according to the London Metal Exchange.

In its financial report for 2015, Shimano said its bicycle products remained "relatively affordable because of a continuing depreciation of the yen. This factor also contributed to brisk order-taking."

In the same report, Shimano noted that in North America, retail sales were robust but distributor inventory levels were at a "somewhat high level."

According to dealers who stock Shimano parts, the company isn't taking back any of the inventory bought at old wholesale pricing or offering back credit or a rebate to dealers for the difference in pricing.

Moreover, dealers noted that even with the reduction in pricing from distributors and Shimano direct, they are unable to compete with Internet discounters.

"Even at the new lower cost, many items are still available cheaper overseas than here," said Mike Jacoubowsky, owner of Chain Reaction Bicycles, whose brick-and-mortar store often is confused with the online U.K. retailer with the same name. "They haven't really addressed the problem.

"The problem is the U.K. What other industry is there where customers can buy products for the same or less than we can? We've ordered pedals from Chain Reaction and Wiggle because they were cheaper than from Shimano," he added.

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